[Sonali Khanna] 0:12

You’re listening to the Berkeley Technology Law Journal Podcast. I’m Sonali Khanna.

 

The metaverse is the convergence of two ideas that have existed for many years: virtual reality and a digital alternate life.¹ For decades, technologists have dreamed of an era when our virtual lives would play as important a role as our physical realities through increasing interaction with our friends and colleagues in a virtual space. Consequently, we would spend money there too, on outfits and other ‘cool’ objects for our digital selves.²

 

In what techies call “the metaverse,” virtual reality serves as a computing platform for living a second life online.³ For example, in virtual reality a user could wear a headset immersing them in a 3-D environment where they could interact with virtual objects and communicate with others through a microphone.⁴

 

As a buzzword, the metaverse refers to a variety of virtual experiences, environments, and assets that gained momentum during the pandemic when daily life shifted online.⁵ Together, these new technologies hint at what the internet might become next and what rights it might implicate.

 

To give us a taste of these developments, our guest for today is Professor Molly Van Houweling, a clinical professor at UC Berkeley School of Law, a legal scholar, and an American cyclist.⁶

 

Professor Van Houweling is an Associate Reporter on the American Law Institute’s Restatement of the Law of Copyright and is an Adviser to the Restatement of the Law of Property. She also serves as Chair on the Board of Directors of Creative Commons and is a founding Director of Authors Alliance.⁷

 

Much of Professor Van Houweling’s research focuses on copyright law’s implications for new information technologies. Her recent scholarly work includes “The New Private Law and Intellectual Property,” forthcoming in the Oxford Handbook of the New Private Law (2020); and “Intellectual Property as Property,” in the Research Handbook on the Economics of Intellectual Property Law (2019).⁸

 

On today’s episode, my colleagues Kavya Dasari and Chris Musachio sit down with Professor Van Houweling to discuss property rights in the metaverse. Afterward, my colleague Jim Lischeske will be highlighting the key takeaways from that discussion. This has been Sonali Khanna. Enjoy the conversation!

 

[Chris Musachio] [2:33]

Good morning, Professor Van Houweling. My name is Chris Musachio. And thank you for joining us today.

 

[Kavya Dasari] [2:38]

Welcome Professor Van Houweling. Thank you for sitting down with us today. We’re very excited to explore the topic of intellectual property rights in the metaverse with you. To really dive right in to shed light on the metaverse as a concept, could you highlight for us the differences, if any, between traditional video games and the metaverse. Specifically, are there any kinds of new IP protections available to developers in the metaverse that are unavailable to game developers?

 

[Professor Molly Van Houweling] 3:08

Sure, happy to field that Kavya. And thanks so much for having me. I’m really looking forward to a fun conversation where I imagine I might learn from you as well as maybe being able to shed some light on intellectual property issues. And I have to admit that something that I’m still getting my head around is, what exactly people mean when they talk about the metaverse.

 

I think when Mark Zuckerberg uses the term, he’s referring to something that his newly branded company is building and wants us to all populate.⁹ Whereas I think other people use the term more generally to refer to virtual environments, including those that are not built by the company Meta that replicate reality, sometimes using virtual reality technology and sometimes using technology that we’re more familiar with from traditional video games to simulate a world. And platforms like Second Life have been doing this for decades.¹⁰

 

So, I think we’re not dealing here with issues that are entirely new, even though the term metaverse might be a newly trendy way to refer to them. And I think that a lot of the issues are just variations on issues that we see in video games as you suggested, and in all realms of actual and virtual life. So, if there are new technologies, say new virtual reality technologies develop, those might be protectable with patent protection. The software that underlies them might be protectable through copyright. And of course, if there are new goods and services, they might be protectable by trademark.¹¹

 

But that makes it all sound boring and commonplace. I do think that there could in fact be new and exciting issues involving what people create and do in the metaverse. I see it as potentially a virtual environment for all kinds of activities like drafting documents, creating and performing music, everything that happens in real life, but in fact, complicated by the fact that it’s happening in a virtual realm. Just for example, something I think we might be digging into, when someone hands a friend a book, in the real world that in fact does not implicate intellectual property rights, so long as you have lawfully acquired that book.¹² But when the same activity happens in a virtual universe, that, because of the technology underpinning that handoff, you might in fact be doing lots of things that have copyright implication that you’re not doing in the physical world, because that is making a copy of the digital file and publicly performing it or displaying it, excuse me, to other people who are watching that exchange, et cetera.¹³ So, I think, ironically, it might be the way in which the Metaverse allows us to do more kind of everyday things virtually that is the most cutting-edge feature of it.

 

[Chris Musachio] 6:14

Taking this moment to transition a little bit from the creators of the metaverse to users, would user-generated content in the metaverse obtain IP protections? For example, if a user were to draw a painting on Facebook Horizons, would that painting belong to the user or the platform? Would that be a qualifying medium?

 

[Professor Molly Van Houweling] [6:39]

Great question. And we’ll start with the basics. So, the default of copyright protection, which is super relevant to paintings – that’s in the heartland of the kind of creative work that copyright law protects – the default of copyright law is that protection is initially granted to the author. And it’s granted automatically as soon as a creative work is created in any tangible medium of expression. And so long as it’s captured for more than just a fleeting moment in computer memory, as I assume it would be in this scenario, that is fixed which is a requirement for copyright protection, and almost every painting is going to have some modicum of creativity, which is the other basic requirement for copyright protection. So as soon as that happens, the default of copyright would say that the person who did the painting, that is the user here, would be the copyright owner.¹⁴

 

Now, I keep saying by default, by default, by default, because all of this can be altered by contract. So, although an author is the original owner of the copyright, the Copyright Act makes it easy for authors to transfer their copyrights, in whole or in part, to other people.¹⁵ And so you can imagine a scenario where the Terms of Use of a platform specify that as a condition of using this platform, you assign your copyrights to us.

 

Now, I say the Copyright Act makes that easy. It doesn’t make it totally easy. There is a little obstacle. That is if you’re going to assign your rights in an exclusive way, there’s a requirement that that assignment be in writing.¹⁶ And it’s not entirely clear yet whether courts will consistently enforce, as a writing, something as easy to do as click “I agree,” for example. I think the better view is that that is not a writing that satisfies the Copyright Act’s so-called written instrument requirement.¹⁷ And so you should have to do something more. At least, like, type in your name to signify that you are really assigning over your rights. But we could certainly imagine that happening.

 

Now I’ve taken a look at what I think is the applicable Terms of Use, and they appear not to demand that users sign over, assign, their copyrights, but rather that they give a license to Meta, which I think owns Oculus, which owns Horizon, which owns etc. So, so far as I’m tracing the genealogy of these platforms, it looks to me that the relevant terms of service say that you are giving the platform a non-exclusive license. Which makes sense because, of course, the platform to populate, the let’s just go ahead and call it the metaverse, it needs to be able to display the paintings that people paint there, to have their avatars walk around and so forth. And so, to the extent rights are held by the users, the platform’s going to want to have, not necessarily ownership of the intellectual property, but permission to use it so that they can have a well-populated universe.

 

So, so far that seems to be a lot of what is happening. But you could imagine platforms being greedier than that. And this is something that I worry about because I worry, especially when we have companies, large powerful companies, like Meta making investments. I do worry about users getting locked in to particular platforms. And to the extent that the things that you create on one platform, you cannot easily take away and use on another platform because you have signed away your intellectual property rights. Or even if you haven’t, it might just be technically difficult to get the files in order to insert them somewhere else. And that might make people feel locked into these platforms, as I think people already feel locked into Facebook, for example, because that’s where all their friends are at least if they’re of a certain generation. And so, I do worry about the metaverse ultimately being that way as well and so giving even more power to relatively consolidated platform owners.

 

 

[Chris Musachio] 10:57

Do you think avatars would be best afforded protection as a work of art? Or maybe as a person’s name, image, likeness?

 

[Professor Molly Van Houweling] [11:11]

Yeah, it’s a really thought-provoking question. And I think they could certainly be protected under both copyright, to which we typically turn to protect works of art, and also state law rights of publicity, to which we typically turn to protect people’s names, images, and likenesses. And I think which is a better fit will depend in part on the nature of the Avatar.

 

So, some avatars might actually be so boring and stock as to not have the modicum of creativity that’s required for copyright protection. If you have just taken the off-the-shelf shapes of a head and body, for example, that might not be copyrightable if it’s not original at all. But it might be super original. Just like any depiction of a human in a sculpture or a painting might be. So you could totally imagine avatars being really rich, creative, and protectable works of art.

 

You can also imagine them being a likeness of a human being. So they could be really quite realistic to look like a person and be squarely within the likeness that is protected by the right of publicity. On the other hand, for a lot of people, the point of the Avatar is to not look exactly like them, but to be maybe a cartoony version of them, or sometimes something completely different that represents their personality, even if it doesn’t represent what they actually look like.

 

And here, I think this is something that will be potentially interesting. You can imagine people making claims that their avatar is their likeness, even though it looks nothing like them. And why do I think this? Well, I think that’s in part based on cases like one that you might have encountered in law school, the Vanna White case,¹⁸ about a commercial that did not, in fact, depict through a photo or even really a look alike, Vanna White, the hostess of the Wheel of Fortune. Instead, it depicted a robot that looked like a robot. And the only thing it really had in common with Vanna White was it was wearing a blonde wig and standing by a Wheel of Fortune set. But of course, that made people think of Vanna White, because Vanna White is the person who does that. And so, the court held that this was in fact, a likeness, or at least protected by the law that protects against unauthorized use of likenesses.¹⁹ And you could imagine someone being known for their avatar, even if their avatar doesn’t look anything like them. So, I’ll be super interested.

 

I don’t know of any case that has taken the right of publicity that far, but I could certainly imagine in terms of why people think that the right of publicity should be protected, partly because it protects your feeling of personal connection with your identity. Well, you can imagine people really having a sense of identity that is expressed by their avatar and really being, you know, offended or other people being potentially misled if someone else’s running around with my avatar doing things that I wouldn’t do. So, it’s yet to be seen, but I think that could be a very interesting development in the so-called metaverse.

 

[Chris Musachio] [14:35]

Absolutely. There are so many new doors opening up with the Metaverse. I recently watched a CNET video on the Metaverse where Mark Zuckerberg described his vision for it. One feature, as you alluded to earlier, was the ability to blend physical and virtual in real time. Taking real life objects, books, photos, videos, art, etc., and bringing them into the metaverse to enjoy and share there. would these be considered copies? Could they be infringing?

 

[Professor Van Houweling] [15:15]

Yeah, thanks for asking that. So I think depending on the technology, and, whether when these works are displayed in the Metaverse, whether they are also captured for more than a transitory duration on, say, a computer server somewhere that will determine whether courts think that this is a fixation of the work in a copy.

 

My guess is that the answer to that will typically be, “yes.” But even if it’s not, even if somehow this image is only going so fleetingly across the server before it is momentarily streamed up on people’s displays, that will be a public display. Or if the thing is like a movie on your virtual television set, it could be a public performance. And those two are within the exclusive rights of the copyright owner. So, I certainly think the world full of digital manifestations of creative objects that we enjoy in the real world populating the Metaverse, as I also saw depicted in that Mark Zuckerberg video,²⁰ that does definitely implicate the exclusive rights of the copyright owners in the works that are depicted there.

 

Now you, that doesn’t completely answer whether populating your corner of the Metaverse with these things is necessarily infringing. That’s a separate question. Because of course, there are defenses to copyright infringement including fair use, which is the most flexible one and can be brought to bear for lots of especially de minimis uses.²¹ So, if, for example, the display of a piece of art that you put in your Metaverse environment is super fleeting – like no one can even barely see it because I don’t know it just flashes once every so often. You can imagine that being so de minimis and to have so little impact on the market for the original work as to fall within fair use. But other uses, if you have a virtual book on your virtual bookshelf in the Metaverse, and it’s there and available for your friends to take off the shelf and read, and they can do that instead of buying their own copy of the book, and your friends include anyone on Earth who could stop by your Metaverse library, that is likely to have much more of an impact on the market for the original copyrighted work, and so less likely to qualify as a fair use.

 

Now, you might say, isn’t it the case that if I just had that book that I bought on the bookshelf in my physical library, it wouldn’t be copyright infringement for me to let my friends stop by and read the book. And that is right because of another exception to copyright protection. That is the first sale doctrine, which basically says that when you are the lawful owner of a copy that you have acquired, that was authorized by the copyright owner, you may distribute that copy to other people, you may lend it like a library does.²² For example, you can give it to your friend. However, that limitation of the first sale doctrine does not apply to every exclusive right of the copyright owner. So, if what you’re doing by having this file on the server is not only sharing your copy but making an additional copy, that implicates the reproduction right, which is not subject to the first sale doctrine.²³

 

Also, if you are publicly displaying it by transmitting it all over the world, although the first sale doctrine applies to just displaying a copy by showing it to one person, it doesn’t apply to transmitting it all over the world. And so even though it might seem like what you’re doing in the digital world is practically equivalent to what you’re entitled to do in the physical world, that is not necessarily the case, as a technical matter, because of the technology of making the reproductions and transmitting the information all over the world. And courts have not generally used the analogy to say, “well, still, it just is the same as what you’re doing with permission of the Copyright Act in the physical world.” Lots of litigants have tried to make that argument to say that when I resell digital copies of my CDs in a digital marketplace, that’s no different from selling the physical copy of my CD, so long as I destroy my original copy. That’s practically equivalent to what for sale allows. Courts have for the most part not bought that practical equivalence argument. They’ve said, “Yeah, but that’s not what you are technically doing is making another copy. That’s the reproduction. Right, that’s not subject to first sale.” And I do think that there are also practical differences. So, if in fact, your friends are now everyone in the metaverse who can read the book in your virtual bookshelf, well, that’s going to have a lot bigger impact than just the friends who come to your physical library.

 

[Chris Musachio] [20:31]

It seems like there’s a lot of nuance when you add the virtual world into the physical. I know one of Zuckerberg’s, part of his vision for the Metaverse is this like home space, where you’ll hang out with friends, family from all over the world where you can enjoy videos, listen to music, play games, not bounded by space, like distance. And I know that there is a, like a copyright exception or a protection for, like privately showing movies with groups of people. I don’t know if it’s exactly a protection from infringement, would you be able to explain that a little bit? And how that would implicate with these home spaces? Should it be extended? Does the number of potential viewers matter?

 

[Professor Van Houweling] [21:23]

Sure. So, what I think you’re referring to is the fact that one of the exclusive rights under the Copyright Act is the right to perform a work publicly.²⁴ So, if you show a movie on the side of a building in downtown Berkeley, and anyone can come by and watch that movie, there’s an example of performing a work publicly. But the fact that performing a work publicly is an exclusive right, it kind of suggests that there’s also a concept of performing a work privately that is not within this exclusive right. And to get at that the Copyright Act defines publicly for the purposes of public performance and also public display, which is another exclusive right. And it says that “publicly” means, there are two possibilities, one to perform it at a place open to the public, or at a place where a substantial number of persons outside of a normal circle of a family and social acquaintances is gathered.²⁵ So, even if you have a place that is not open to the public, if you have invited 500 strangers to that place then that too is a public performance.

 

Okay. So, my, when I invite a few friends to my own living room, that’s a classic private performance. It’s not open to the public. And I haven’t gathered a substantial number of persons outside of a normal circle of family and social acquaintances. It’s just my family and friends. So, you can imagine having a virtual screening of something in the Metaverse that seems practically equivalent to that kind of private performance, open only to your family and a small circle of your friends. And to make that argument, I think it would matter how many people you had invited, whether it was anyone who stops by in the Metaverse which is more than just your family and social acquaintances, or whether it’s by invitation only a few people.

 

Now, there are still possible complications, because, again, the underlying technology might make it the case that you are in the course of this performance implicating other rights. So, if there are durable copies being made in the course of this performance, for example, that could implicate the reproduction right, which is not limited to reproductions that only go to the public as opposed to a small circle. Now, I think this is a place where Fair Use could come in. If there are some incidental copies made in the course of doing a private performance, I could imagine courts accepting that as an instance of fair use. On the other hand, as I’ve said, there are cases I’m thinking of cases like the MP3.com case, the ReDigi case, where courts have kind of been hyper-focused on the fact of reproducing things and copies, even though you’re doing things that seem equivalent to things that would be legal in the physical world and saying that’s nonetheless not legal in the digital world where it involves making more unauthorized copies.²⁶

 

So, I think I would like a world in which it’s easy to have digital watch parties and invite our family and friends. I think people have especially been trying to replicate some of those real-world gatherings in equivalence of the Metaverse during the pandemic. And I think that’s a socially useful thing to be able to do. And interestingly, the Supreme Court and one of the kind of classic now technologically outdated, but I think not normatively outdated cases, the Sony case about whether people could time-shift television shows.²⁷ The court really seemed to embrace the idea that there’s social value in allowing people some flexibility in when and where they consume valuable creative works.²⁸ And I would like to see some openness to that flexibility in the Metaverse as well. On the other hand, I want to acknowledge that the ability to share with people spread all over the world really does have the potential to have a bigger impact on the copyright owner than the impact you can have just inviting the people for whom it’s convenient to stop by your living room. And so that’s an important countervailing thing to consider.

 

[Chris Musachio] [25:55]

One last point on that issue – whether it’s movies, listening to music – assuming that these home spaces are considered to be infringing when you perform them in that way, who would be the best person to acquire a license to still have that occur from a policy standpoint? Because to me, it seems like there isn’t like a market for a general lay person to go out and get a license to watch a movie or play an album, as opposed to maybe the platform.

 

[Professor Van Houweling] [26:33]

Yeah, Chris, my intuition I think is similar to yours, that the platforms are going to have a lot of potential bargaining power and just be able to overcome the transaction cost obstacles that might make it hard for every individual user to bargain with every individual copyright owner to be able to get permission when they want to do something that implicates the copyright owners rights in a movie or a piece of music, for example. And we see this in the physical world. So, often venues for performing musical works, they will get a license that is then for the benefit of people who perform there and so the performers don’t have to get individual licenses. The venue has often gotten a blanket license for whole catalogs of musical compositions. You can imagine something very similar happening, where platforms get blanket licenses on behalf of all of their users. And that does seem potentially efficient in terms of the transaction costs and taking advantage of the bargaining power of the platform. And so, I think that that is a promising idea. On the other hand, I wouldn’t want it to be the case that users were only able, on the platform, to enjoy works that had been licensed through one of these blanket schemes. You can imagine that that would mean that it wasn’t easy to enjoy with your group of virtual friends in your Metaverse living room, independent artists work, maybe licensed on terms different from that blanket license. So, I think I would like to see some hybrid situation where there are blanket licenses acquired by the platform that are available for lots of things. But that that’s not an obstacle to individual users saying I want to enjoy this other work that I have individually negotiated for. Or maybe it’s available under the terms of a creative commons license that says anyone may use this as long as they give me credit for it. I would want there to be openness to the whole variety of creative works, even if the platform hasn’t negotiated for the rights.

 

[Kavya Dasari] [28:46]

So yeah, kind of shifting the topic a little bit to enforcement. So what if, for example, a developer on the Metaverse were to recreate an image of a copyrighted painting on their Metaverse. So then could the owner of the copyrighted painting in the physical world enforce their IP right and prevent the developer from using the image of the painting?

 

[Professor Van Houweling] [29:11]

Yes, I think that would be a pretty clear case of a public display of the work via the Metaverse. It would probably also be a reproduction and probably also a derivative work. So, lots of exclusive rights of the copyright owner tied up in that. As I’ve said, I could have imagined that a really fleeting use of a piece of art might be fair use. But if it’s kind of installed on display in the Metaverse that would not be fleeting. And that would be enjoyable by people in the same way that the original work of art was enjoyable. Now, I guess you could argue that this is akin to displaying a work of art on the wall of your gallery, which an owner of a gallery who has acquired a copy is entitled to do under a different variation of the first sale doctrine that allows you to publicly display in a particular place a copy of that you have lawfully acquired. But I think here again, courts would focus on the fact that you are doing more than just publicly displaying it in one physical place. You are transmitting your display around the world. You are making lots of reproductions. And you are, you know, by translating the painting to a digital medium, you are also probably making a derivative work. And so, I think courts would see this as much more than just exercising your first sale rights. And again, I think there’s something to the idea that you’re having a bigger practical impact. If, you know, the people who can stroll through your gallery are not just the people who are physically present there, but basically anyone on Earth.

 

[Kavya Dasari] [30:56]

To kind of just go a little further on that question. For example, in the hypothetical we presented, it was a developer who copied this painting, a copyrighted painting. What if it was in a scenario where the developer makes it as one, and then a second scenario where a user put a painting on their virtual home, for example, in those two instances, who do you think would the actual copyright owner be enforcing their IP right against? Would it be the platform? Or would it be the user of the platform?

 

[Professor Van Houweling] [31:35]

Well, I think that there are theories that could hold either responsible for the part that they play in making that reproduction, transmission, and derivative work. There are some limitations on liability that are relevant, potentially to the platform owner under Section 512 of the Digital Millennium Copyright Act.²⁹ This is relevant to lots of platforms that we’re familiar with, like YouTube, for example, where they are not necessarily on the hook for every infringing work that appears on their platform, so long as they comply with terms of the DMCA, which include having a process for taking down works once they receive a notice that they are infringing.

 

So, we could imagine Metaverse platforms – and I imagine that they already have this to a great extent – having policies that allow copyright owners to say, “take that down,” and then they will. And that’s the way this kind of thing can be resolved. And you could imagine that being a lot easier for many copyright owners than trying to do any kind of enforcement against the individual user who may be, who knows where, not answer their email, etc. The same kind of transaction costs that make it difficult for users to negotiate with every copyright owner can make it difficult for every copyright owner to track down every user. So, they might instead want to go to the platform.

 

Now, I kind of wonder whether, I’ll be interested to see what attitude the platform’s take to this. I was also struck in watching the Mark Zuckerberg video by how much he seems to envision people bringing a lot of stuff into their Metaverse homes.³⁰ And I don’t know whether he’s going to want to be in the business of, you know, sending out messages, telling people to take down that stuff that they’ve populated their home with because it is copyright or trademark infringing. My guess is that they will probably in fact, negotiate a lot of licenses that allow people to, you can imagine like, “would you like a painting on the wall of your Metaverse home? Here is a library of paintings that we have gotten the rights to!” Or maybe, this would be more exciting to me, “here is a library of public domain works that you could use to populate your home.” My guess is that there will be some efforts to help people avoid copyright infringement in that way so that no one has to worry about it. Short of that, I think that copyright owners will often go to the platforms to say, “take down this infringing stuff.” And then in theory, the individual users could be held liable. But I think that that will be difficult as a practical matter.

 

[Kavya Dasari] [34:26]

Yeah, as a policy consideration it does seem more easier to go after the platform itself. Kind of also, recently, there’s been a land rush for real estate on the Metaverse. So, prices for virtual plots of land on virtual worlds, for example, like Decentraland, and SandBox have gone up in prices by about 400% to 500%.³¹ I think I remember a real estate company purchasing a plot of land, I forget how how large it was, for $300,000,³² almost the value of a house in the physical world. So should property rights of the virtual land be recognized in the Metaverse, just like in the physical world? And would you say that some fundamental themes of recognizing property rights, for example, a property owner’s interest in improving the land don’t really apply in the case of virtual land?

 

[Professor Van Houweling] [35:25]

Yeah, Kavya, I think you’re really onto something that some of the justifications for having a regime of property rights and physical things don’t really seem to map very well to the virtual world in terms of granting property rights, because we worry about the tragedy of the commons, that there are these resources, and they’re going to be overused or under-cultivated if there’s not a caretaker assigned to them. That is one function that property rights serve. Well, when we’re talking about this newly created virtual real estate, while it wasn’t otherwise, like being spoiled with no caretaker, it didn’t even exist before. Now, you could imagine that this nonetheless triggers our concern with wanting to motivate people to develop kind of new frontiers by granting property rights. And I guess I’m not positive yet whether Metaverse real estate really is the kind of thing that, as a public policy matter, we want to encourage people to cultivate in that way. It doesn’t strike me as necessarily equivalent to a patented invention or a copyrighted work of creativity. Now, on the other hand, you could say that we have certain reasons for recognizing property rights and tangible things and an intellectual creation and we e don’t necessarily grant them for just anything or any reason. And that’s in part because property rights come with costs. So, in the real world, the fact that only one person has access to a plot of land, well, that limits other people’s access. Those other people might need housing, but they can’t find it because all of the land is owned by other people. Or these people might be creative, but they can’t express themselves because to do so would arguably infringe someone else’s right. So, these property rights come with costs. I’m not sure on the cost side of the equation that it costs as much as a society for someone to claim exclusive rights to some virtual piece of land. Fine, have at it. If you want to spend $300,000 on what seems to me like a bit of vaporware, well, sure, go for it. And that will literally be as valuable as the paper it’s written on. By which I mean, this may or may not get you anything truly valuable in the future. It depends in large part on what it is that you are buying. Which is in this space, I think, less defined by the common law of property, and more defined by the contractual agreements that say, when I make this investment in your Metaverse platform, you give me the rights to claim certain things, to exclude people from this virtual space, etc. And what does that mean, for example, when this platform goes out of business? Are you, do you then have nothing? That certainly seems possible. And we’re going to have to look into well, probably the law of bankruptcy as well as the contracts that you signed to figure out what it is exactly that you own.

 

[Kavya Dasari] [38:43]

Yeah, and I think a lot of us are having a hard time understanding what it means to be a physical world and how that maps on to our understanding of this virtual world. So kind of just this virtual land is usually bought from the platform or through a developer who makes the land and the program. So, is this akin to a system where the government is taking ownership of all of this land and then distributing rights of it to everyone else, whoever purchases it or licenses it? Or should this be characterized as a sale of part of the developers intellectual property?

 

[Professor Van Houweling] [39:29]

So, that’s a really thought-provoking question. And I think my first reaction is that this was the right metaphor – or not even a metaphor – might be right doctrinally, is that this is intellectual property that wouldn’t exist except for the efforts of the developer. Unlike when the government claims a bunch of land by eminent domain and then redistributes it, that is land that was owned previously by someone else. And one of the most controversial, of course, parts when the government does this sort of thing is that the people who initially own that land who are having it taken by the government, even if they are paid some kind of compensation, often feel that that is unfair, and overreaching. Where the developer can say, we develop this out of the ether, and you know, coded the platform ourselves and so there’s not that tension with individual rights when a developer sells things that they have developed in their virtual world.

 

On the other hand, when we think about, once these plots are established, when we think about the potential impact that they could have on people’s lives, I do think that there are some important analogies to governmental power. You can imagine if we, in fact in the future, and have the Metaverse in the way that Mark Zuckerberg envisions and if Mark Zuckerberg owns it, that will be as if he owns the public square. And it will be difficult to get the word out to other people about things potentially, if you are subject to the control of the developer for what you can communicate in what is essentially the public square. And doctrinally, often people say, this private company is violating my First Amendment rights by not letting me say what I want to say on their platform. And a doctrinal answer to that is that the First Amendment does not apply to private companies; it only applies to the government.³³ So that argument is just wrong. And they have every right to ignore the First Amendment and allow exactly what speech they want on their platform so long, it’s that’s consistent with their terms of service. On the other hand, there are old, now, and much ignored Supreme Court cases about instances in which private parties really have assumed government-like power. And where that has happened, the Supreme Court has said that the private parties can sometimes be treated as the government for purposes of the State Action Doctrine, which is the doctrine that says that the limits of the Bill of Rights are applicable only to the government and not to private actors. A classic case here is Marsh v. Alabama, which is about a company town, that was in all respects a town except that it was owned not by the government, but by a private party.³⁴ And the Court said that government has to respect the ability of people, there are people who wanted to hand out religious literature on the sidewalk, they had to let them do it and be subject to the First Amendment because they were acting so much like the government.³⁵ And I could imagine there in terms of, not really how they establish and distribute the rights, but how they then eventually limit access to people to what might have become an important public resource, that’s where I think it may be we’re thinking in the future about under what circumstances we should treat the owners of the Metaverse the way we treat the owners of the universe. That is, like governments, subject to constitutional limitations.

 

[Kavya Dasari] [43:15]

Yeah, I think it becomes so overused as in the sense that people are on it for a long time, it can become something akin to a government entity in that situation, because it has absolutely all control over what happens and what communications can be made, or what can be done. So I can see that as a possibility, depending on how developed these Metaverses become.

 

[Professor Van Houweling] [43:42]

Yeah, I think it’s easier to imagine now having lived through the pandemic, where we can imagine a world in which we really get a lot of our daily needs and interaction just through the medium of internet connected computers and not have otherwise contact with the outside world. I think in general, we think that the ability of any one private company to control our environment and what we’re exposed to is limited. So, the fact that your employer doesn’t let you hand out flyers in the hallways of your business, well, there’s a public sidewalk outside of that employer. Or you also have to go to the grocery store and there’s a public sidewalk outside of the grocery store. And so often in the real world, people, courts were able to say, look, there are plenty of alternative avenues for you to reach your potential listeners because people are out and about being exposed to a wide variety of public and private spaces. And that has historically been true, but it need not be true if we’re able to seal ourselves off and just get physical stuff delivered by the owners of the Metaverse and spend all our time interacting with people in that closed environment. Now, I’ve got to say people have been worrying about this sort of thing for decades. I first became obsessed with the State Action Doctrine when I was a law student decades ago, and some of these virtual platforms were emerging. But guess what, you haven’t even heard of those virtual platforms, like MySpace and GeoCities, because they’re no longer ubiquitous. They have been replaced by alternatives. So sometimes, our fear about the consolidating power of today’s powerful companies doesn’t stand the test of time because they do, in fact, get replaced by competing platforms. So, in that way, there’s the threat of them not being as ubiquitous as Mark Zuckerberg’s vision would lead us to believe.

 

[Kavya Dasari] [45:45]

Now that’s definitely a fair point. We see competitors pop up all the time. And besides, it’s always about consumers, we can choose not to go on to the Metaverse, for example. So there’s definitely all of that factors involved. Stretching this idea of virtual worlds a bit, for example, Decentraland, has artificial scarcity coded into the Metaverse wherein only a fixed number of virtual plots of land are available for purchase.³⁶ This limited supply of virtual land in some Metaverses means that it’s more likely that the virtual land will end up in the hands of wealthier players. So, given this situation, are we looking at something akin to a tragedy of the anti-commons? For example, will the powerful players’ property right to exclude other players from accessing their virtual land impede creativity on the Metaverse?

 

[Professor Van Houweling] [46:44]

So I’m not sure that it’s a tragedy of the anti-commons, which we typically use to refer to problems involving lots of overlapping rights where in order to get access to a thing, you’re going to have to ask a whole bunch of different people for permission. But I do think you’re onto something. This just seems like a tragedy of capitalism, that the people with a lot of one kind of resource are the best equipped to get a lot of another kind of resource. And so the same people who are disadvantaged in the physical world might also have fewer opportunities to take advantage of the creative outlets and other benefits of the Metaverse. So I definitely do think it’s something to worry about. And I do, there are potential anti-commons problems in the Metaverse as well. I mean, we’ve talked about all kinds of potential rights owned by different people. Like your right to your avatar, someone else’s right to the book that you put on your virtual bookshelf, the developer’s right to the software underlying the Metaverse. So there are lots of creative things that might implicate the rights of lots of these people at the same time. And the difficulty of assembling all those rights in order to do the next-generation creative thing, that could be a real anti-commons problem that would burden in particular people who don’t have the resources to bargain and pay permission to all of those people. So I do think we should worry about anti-commons problems and just problems of capitalism of the rich getting richer because these resources are going to be potentially scarce and expensive, just like physical resources.

 

[Chris Musachio] [48:21]

Switching gears a little bit to a different twist in the Metaverse. Some offer non-fungible tokens otherwise known as NFTs, everyone’s favorite buzzword lately, as a way to protect and claim ownership of virtual land or property. However, often an NFT does not give the NFT’s owner all the IP rights to a digital creation. For instance, an NFT owner has a property right less than actual ownership of a physical object. Could you expand on this and whether NFTs serve as an effective means to enforce property rights in the Metaverse?

 

[Professor Van Houweling] [49:10]

So it strikes me that an NFT could be used through the way that it serves as a token of something – it can be a token of a million different things, it could be a token that represents the fact that this developer has told you that you have the right to this plot of land and their platform – and then by replicating itself across the blockchain, that could serve as a, like a good place to keep track of the fact that you have that claim. Now that, it’s – how am I going to do this metaphor –  that NFT is only as good as the paper that it’s written on. That’s not the right metaphor. It’s only as good as what is represented by the paper that it tries to capture and replicate across the blockchain. So, if what it captures is that you have, you know, a temporary right until the platform goes out of business to occupy this corner of it, or if you have a right to this corner, but no right to control the developers ability to end the artificial scarcity and make a million other corners of their Metaverse that compete with yours. There are lots of ways in which recording your ownership claim on the blockchain are not going to, in fact, protect the value of your investment. So, in terms of the types of things that people might worry about, I guess, if you’re worried about the developer just losing track of your claim and being able to prove that it existed, well having an NFT that documents it, it might be valuable for that purpose. But I don’t think it’s going to solve a lot of the controversies that we are imagining, and not solve a lot of intellectual property controversies more generally, either. And I imagine we might want to explore that too.

 

[Chris Musachio] [51:00]

Many clothing companies are embracing the Metaverse wholeheartedly. Some are even offering digital versions in conjunction with the sale of physical items when they’re purchased. Do you think clothes in the Metaverse will receive more protections than IRL clothes?³⁷ Does it create some loophole to grant protection to things that might not otherwise be afforded physical clothes?

 

[Professor Van Houweling] [51:27]

This is so thought provoking. As your question kind of assumes, correctly, clothing in the physical world gets limited protection under intellectual property. In particular, under copyright law, clothing can be considered a useful article. A useful article is anything that has a utilitarian function other than depicting its own appearance. So, a painting is not a useful article because the function it has is to depict its own appearance. Now, clothing has an appearance, and that’s part of its function, to look like nice clothing, but it has other functions as well to like keep you warm and cover your body. And because of the way that the utilitarian functions can be intertwined with the aesthetic functions, clothing gets, it gets some protection, but limited protection under copyright.

 

By contrast, a Metaverse depiction of clothing, you could argue, does not have a utilitarian function other than to depict his own appearance. It is to appear on the Metaverse. It’s not actually keeping the avatar warm, for example. So, I think there is an argument that clothing is not subject on the Metaverse to the same kinds of doctrinal limitations as clothing in the real world. And so, copyright can be used to limit other people’s ability to depict the same creative aesthetic appearance of your clothing without your permission on the Metaverse. Now you ask if this is a loophole. I could imagine it would be a loophole if that meant then that clothing that was protected due to its depiction in the Metaverse, if you then had exclusive rights to produce that clothing in the real world. That would be like copyright protection for clothing through the back door of the Metaverse. Right? I don’t think that is the case. Because the copyright also says that your rights to control the real-life production of useful articles that are depicted in images, for example, is limited. And so, I think that this limitation in Section 113 of the Copyright Act would in fact prevent the owners of copyright and clothing depicted on the Metaverse to use that copyright to control the production of their clothing in physical space.³⁸ Now, there would still be elements that would be protected. Like say you’re, it’s a t-shirt that has basically a painting on it, the copyright protection would protect that painting. It’s not performing any of the utilitarian function that, say, the sleeves are. But, the shape of the sleeves might be impossible to separate from the utilitarian function. And so, despite the fact that you depicted those attractive sleeves in the Metaverse, you would not be able to control people’s production of those attractive and functional sleeves in the real world.

 

[Chris Musachio] [54:30]

Are there any other issues regarding the Metaverse that stand out as particularly interesting or concerning to you that we didn’t touch on or you’d like to delve a little deeper on?

 

 

[Professor Van Houweling] [54:44]

Well, I hope the Metaverse causes a revival in interest in the state action doctrine, which as I’ve said, was the most fascinating thing that I learned about in law school and I’d love to continue our conversation about it as the Metaverse emerges, if it does, as a reality.

 

[Chris Musachio] [55:03]

Thank you for your time. Professor Van Houweling. We really appreciate it.

 

[Jim Lischeske] [55:07]

As tech companies continue to innovate in the Metaverse, transitioning real world activities to virtual spaces brings legal uncertainty. Today’s conversation with Prof. Van Houweling was primarily focused on the interaction of new virtual spaces with property and intellectual property rights. She also discussed how our virtual lives interact with our rights to contract and privacy, and how all of these rights may play out should large firms dominate the Metaverse as they have on the modern internet.

 

The Copyright Act assigns copyright for creative works to their authors, and should continue to protect creators in the Metaverse. Professor Van Houweling raised the prospect that these creators bear the risk that a platform owner might effectively take a creator’s work, for example, by contract or lack of portability between platforms. This risk could increase if one or a few large firms come to dominate the Metaverse, gaining market power to leverage against creators.

 

Metaverse users and platforms will need to exercise caution in how they interact with real-world copyrighted works. Virtual activities might infringe copyright, where their IRL analogs are protected. Professor Van Houweling presented several hypotheticals following this pattern. The first sale doctrine protects lending a physical book to a friend, but it may not protect making a book available to your friends on a virtual bookshelf. Watching a movie with friends in your physical living room does not violate the copyright holder’s exclusive right to public performance but doing the same thing in a virtual home on a virtual-reality couch might.

 

Professor Van Houweling noted the significant role that platforms could play in mitigating these dangers through mass-licensing agreements. Although this approach could achieve important social goals, the public should be wary of pitfalls. For example, licensing deals might exclude small unaffiliated artists or exacerbate user lock-in.

 

Common law property doctrines may require re-evaluation before courts apply them in virtual spaces, and many rights analogous to property may be established by contract rather than by public law. Van Houweling discussed the lack of clarity around traditional property justifications in the virtual world. It may be beneficial to allow companies to experiment with different approaches to property rights rather than impose a legal framework rooted in real property.

 

As the Metaverse emerges and expands, its structure and our interactions within it are likely to implicate core economic and social values. Prof. Van Houweling noted that increasing interaction within a virtual world may subject more public life to the control of private economic actors and suggested that this challenge could be met by reviving the state action doctrine, requiring companies to affirm our rights in certain circumstances.

 

No one can predict the future of technology with any precision, and it’s doubly difficult to anticipate the response of the legal system to technological developments. Many problems may be similar to those posed already by the social internet; others will require fresh scrutiny. Technologists, users, and government actors will need to work together to promote progress and protect our core values.

 

[Seth Bertolucci] [58:31]

Thank you for listening! The BTLJ Podcast is brought to you by Podcast Editors Seth Bertolucci and Isabel Jones.

 

Our Executive Producers are BTLJ Senior Online Content Editors Karnik Hajjar and Thomas Horn. BTLJ’s Editors-in-Chief are Loc Ho and Natalie Crawford.

 

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The information presented here does not constitute legal advice. This podcast is intended for academic and entertainment purposes only.